Merck, $MRK, made a bottom in April and then started to move higher. It met resistance in early July and pulled back, stopping just above the 200 day SMA. A reversal took it back to the prior high where it met resistance again and dropped back. This time it crossed the 200 day SMA intraday before bouncing. Eventually it worked its way back to resistance and rejected again in October. After another pullback it is back at resistance and stalling again. The triangle it has built gives a target to 98 on a break higher. The Bollinger Bands® are turned to the upside and opening. The RSI is rising in the bullish zone with the MACD rising and positive.
Merck, Ticker: $MRK
There is resistance above at 92 and 96.70, both from 2001, when an enormous Shark harmonic began. The first Potential Reversal Zone (PRZ) is at 88.60, with the second PRZ at 106.65. Support lower comes at 85.15 and 83 then 81.70. Short interest is low under 1%. The stock pays a dividend with an annual yield of 2.80% and it begins trading ex-dividend on December 13th. The company is expected to report earnings next on February 5th.
Merck, Weekly, Ticker: $MRK
The December options chain shows the biggest open interest at the 77.50 strike on the put side. The call side shows larger open interest at 87.50 bracketed by 85 and 90. In January the 75 put has the largest open interest and it tails at higher strikes, but on the call side it mirrors December, with 87.50 bracketed by 85 and 90. The February chain is the first that covers the next earnings report but is still building, without enough activity to discern possible sticking points.
Trade Idea 1: Buy the stock on a move over 88 with a stop at 85.
Trade Idea 2: Buy the stock on a move over 88 and add a December 87/84 Put Spread ($1.05) while selling the January 90 Calls (86 cents).
Trade Idea 3: Buy the December/February 90 Call Calendar ($1.50) while selling the January 82.50 Puts (86 cents).
Trade Idea 4: Buy the 80/90/95 Call Spread Risk Reversal ($0.20).
After reviewing over 1,000 charts, I have found some good setups for the week. These were selected and should be viewed in the context of the broad Market Macro picture reviewed Friday which with one month left in the decade saw equity markets continuing to show strength.
Elsewhere look for Gold to continue its pullback while Crude Oil remains in broad consolidation. The US Dollar Index looks to continue to drift to the upside while US Treasuries continue to channel lower. The Shanghai Composite looks to drift lower as well with Emerging Markets in broad consolidation.
Volatility looks to remain very low keeping the bias to upside for the equity index ETF’s SPY, IWM and QQQ. The SPY and QQQ look to continue to print new all-time highs while the IWM has joined the uptrend and looks to start to play catch up. Use this information as you prepare for the coming week and trad’em well.
The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.